Assume that Big Mutual Insurance expects losses of $500,000,000 over 3,100,000 units. In its ratemaking function,...

Assume that Big Mutual Insurance expects losses of $500,000,000 over 3,100,000 units. In its ratemaking function, Big Mutual uses a 35% expense ratio. Compute the Pure Premium and Gross Rate for Big Mutual.

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Expert Solution

pure premium= losses/ number of units

= 500000000/3100000

=161.29

gross rate= pure premium/(1-expense ratio)

= 161.29/(1-0.35)

=248.19

jeff jeffy answered 1 year ago

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